A Family Office Blog

Winning the Olympics?

February 12, 2018

The Olympic games are here again – this time in the frigid temperatures of South Korea. The immediate focus is on the spectacular exploits taking place on snow and ice, and the surprising cordiality between the two Koreas. What is less obvious is the enormous sum of money that has been spent to prepare for the Games. Let’s look more closely at what this has meant for South Korea.

These 2018 Winter Olympics are being held in PyeongChang, a mountainous county with just over 43,000 inhabitants. The cost of building the required buildings and infrastructure is estimated to be around $13 billion. For context, when bidding for the games South Korea estimated the cost would be half of this amount. I guess South Korea should consider itself lucky. The last Winter Olympics cost Sochi roughly about $50.0 billion as Russia sought to make a statement on the world stage.

Some of the huge ‘investment’ cost will be recouped. The IOC has contributed $880 million of the overall cost of the games. In addition there should be another $2 billion or so in revenue from ticket sales and other income. That still leaves a price tag of about $10 billion justified only by a hope that tourism, trade and foreign investment will increase in the long run.

Like all Olympic venues, PyeongChang will be faced with the question of what to do with all the venues and infrastructure after the games are over. Well, if you are a disciplined and cost conscious planner like Atlanta in 1996, you design and build facilities which the city can reuse after the games. A prime example is Georgia Tech’s North Avenue apartment complex which was once the Olympic Village that hosted over 10,000 athletes. Another example is the Centennial Olympic Stadium, which has already gone through “repurposing” twice; first as Turner Field and now as a stadium for Georgia State. In comparison, the last Summer Olympics host, Rio de Janeiro, spent $13.1 billion and many of the purpose built venues now lie unused. South Africa also fell in the same pattern back in 2010 when this country hosted the World Cup.

South Korea’s plan after the games is fairly simple: the country is expecting to downsize the $60 million, 35,000-seat stadium, to 5,000-10,000 capacity with a featured museum dedicated to the games. The country is expecting the rest of the infrastructure to go unused, especially given the small local population. PyeongChang will simply have an incredible, world class ski resort for the more experienced snowboarders and skiers.

It is safe to say that hosting the Olympics is neither easy nor cheap. At the same time we should not lose sight of what the games are really about. The opportunity to bring people from around the world together to compete at the highest level is priceless, and this particular games might have the unexpected bonus of bringing about a thaw in Korean relations.